How Do Company Acquisitions Work? What does a Mergers and Acquisitions Lawyer do?
If you are starting a business, an acquisition could begin something exciting for your business. Your business is doing well and has gained enough traction to attract someone bigger and more successful. On the other hand, companies choose to pursue a merger or acquisition to achieve economies of scale, transfer resources, diversify, or sell a service or product to an existing customer.
For whatever reasons you choose to undergo the process of mergers and acquisitions, you will need a business acquisition to help you get through the process.
The potential benefit of combining two business entities is usually greater than the sum of the individual businesses. That’s why you will need to be careful and get your facts straight not to get carried away in the potential financial benefit.
Read along to understand more about business acquisition law and the working procedure.
The Working Procedure When a Company Acquires Another One
The mergers and acquisition deal process can be challenging if you don’t know the technicalities. The business and law jargon can easily throw you off, and you might find yourself getting the short end of the stick.
Here’s the 10-step working procedure:
- Develop the Acquisition Strategy
Developing an acquisition strategy needs careful thinking to avoid unnecessary business acquisition that doesn’t meet your goals. So, you need to be clear about what your business is about, what you stand to gain, and the purpose of acquiring the target company.
- Set the Merger and Acquisitions Search Criteria
The next step is determining the method to sift the various businesses to land the one that will meet your needs. So, you will need to keep some key issues in mind, such as management, location, treasury, elimination of competition, etc.
- Look for Potential Acquisition Targets
At this stage, you will use the search criteria that you have developed to seek out the business or businesses that fit the bill.
- Commence Acquisition Planning
Now you can contact the companies that meet your search criteria. You can check if they appear to offer good value. A conversation with the target company is necessary since it will help you get more information and see if the company is worth it.
- Perform Valuation Analysis
If the initial conversation goes as planned, the acquirer will ask the target company to provide the necessary information, such as financials. The information is vital since it will help you evaluate the business as a suitable acquisition target and as a business on its own.
After you have made the valuation models and are happy with the prospects, you can come up with a good offer. Once the initial offer is on the table, the two businesses can negotiate.
- Due Diligence
Due diligence is a process that begins when the offer has been accepted. It is an exhaustive process that aims to confirm or correct the target company’s value assessment. It involves checking every aspect of the company’s operations.
- Purchase and Sale Contract
If you complete the due diligence process without any major issues, you can proceed to the next step. The companies will decide on the purchase agreement, whether it will be a share purchase or an asset purchase.
- Financing Strategy
Before beginning the acquisition process, you must have figured out or explored where the financing will come from. However, the financing details will come together after signing the purchase and sale agreement.
- Closing and Integration
This is the end of the deal and the beginning of a new chapter. So, the management teams will work together on the process of merging the two firms.
The Responsibility of a Business Acquisition Lawyer in the Merger and Acquisition Process
Mergers and acquisitions are complex, so the process needs to be done over months and even years to ensure that it is done properly. So, you will need the services of our business acquisition lawyer in Tulsa, who plays the following roles: